Nonprofits contemplating the switch to solar energy face a significant hurdle in financing, with two main options at their disposal: primary ownership and third-party ownership.
Opting for primary ownership means that the nonprofit must shoulder the initial expenses of the solar project, whether through direct payments or loans. However, this choice grants them full access to the array of long-term cost-saving benefits that solar energy offers. The recent introduction of the direct payment option under the Inflation Reduction Act has made primary ownership a more feasible and attractive option for nonprofits.
Third-party ownership has historically been the go-to option for nonprofits prior to the direct pay option becoming available. Solar leases and power purchase agreements (PPAs) often present no-money-down opportunities. In this arrangement, an investor covers the system’s costs, and the nonprofit buys the electricity produced at a rate usually lower than that of utility providers. However, this model transfers the tax savings and other incentives to the system owner. It can also complicating property sales due to lease or PPA transfer requirements.